A showdown over the housing bill between the White House and congressional Democrats took shape Wednesday after Democrats vowed to push forward a proposal that would help communities purchase foreclosed properties and the White House renewed its call to veto any bill containing that provision.

Despite expressing optimism that the bill would pass next week, the White House reiterated its threat to veto any housing bill that contains a provision being pushed by the Congressional Black Caucus (CBC) that would give $4 billion to communities to purchase foreclosed properties.

Democrats were considering dropping the provision at the beginning of this week, but when the White House and Treasury Department sought new authorities in order to extend an unlimited line of credit to Fannie and Freddie, Democrats sensed leverage.

The administration has called for Congress to move quickly on the overall housing package, which includes provisions requested by the Treasury to prop up the two mortgage companies.

The latter point has created a rift with congressional Republicans, as some are insisting they will vote against the bill if it includes the uncapped help for the two mortgage houses. The White House said it cannot envision getting a housing bill that does not include the assistance, and Treasury Secretary Henry Paulson met with Republicans on the Hill Wednesday to try and shore up support.

The provision attracting the ire of the administration would grant $4 billion in CDBGs to local governments to buy foreclosed properties. The White House maintains that provision “helps the lenders, not the homeowners,” according to press secretary Dana Perino.

“There’s been no change in our position on that point,” Perino said in an e-mail.

House Financial Services panel Chairman Barney Frank (D-Mass.) dismissed the veto threat. He said the administration is making huge demands and needs to be prepared to give a little to get what it wants.

“That will not deter us,” Frank said of the veto threat. “We have to tell Democrats, ‘Do everything the administration wants,’ but we’re not going to address their priorities?”

Frank said that there will not be any hearings on the bill and that he expects it to come to the House floor next Wednesday. He said he’s stayed in contact with Senate leaders and expects the House-passed bill to pass quickly in the Senate and go to the White House.

Rep. Maxine Waters (D-Calif.), one of the most outspoken supporters of the foreclosure purchase program, said pulling the measure could cost the support of the CBC for the administration’s plan to shore up Fannie and Freddie, formally known as government-sponsored enterprises, or GSEs.

“The Congressional Black Caucus is working hard to deal with the devastating effects of foreclosures on our communities,” Waters said. “We’d have to look seriously at our support for helping out the GSEs without support for our cities and towns.

“He needs every vote he can get,” Waters went on. “If the president wants to make this a national fight, then it will be a fight.”

Perino maintained that the president is hopeful Congress will move quickly, “and we are hopeful that they get it to us in a form that he can sign, which would include stripping out that CDBG money.”

Perino said the administration thinks Congress will pass the bill next week in light of the housing crisis.

“I just can’t imagine that they would go home for the August recess without getting this done,” Perino said.

Perino added that the White House is optimistic that the U.S. will be able to pull out of the housing crisis by the end of the year.